As prospects for peace remained elusive for Israelis and Palestinians in 2012, Israel turned its attention to Iran. Throughout 2012 amid increasing concern that Iran was inching closer to developing nuclear weapons, Israeli prime minister Benjamin Netanyahu wavered between threatening a preemptive strike against Iran and letting diplomacy take its course.

The International Atomic Energy Agency reported in August that while economic sanctions have hurt Iran, they have not slowed progress on the country's nuclear program. In fact, the report said Iran's nuclear program had advanced even faster than anticipated despite the sanctions and diplomatic isolation imposed on Iran by the international community. Netanyahu indicated that Iran was getting close to crossing the "red line" and that Israel had to thwart Iran's nuclear ambitions. "The relevant question is not when Iran will get the bomb. It is at what stage can we stop Iran from getting the bomb," he said. Netanyahu's threats were not taken lightly, especially since Israel has in fact acted preemptively in the past: Israel attacked a nuclear reactor in Iraq in 1981 and Israeli jets fired on a partially built nuclear reactor deep inside Syria in 2007. In late September, Netanyahu calmed fears that a preemptive attack was imminent in an address to the UN General Assembly. He said he believed Iran would not have the technology to enrich uranium until at least the spring of 2013 and therefore there was time for diplomacy to deter Iran's nuclear program.

Shifting Alliances in Governing Coalition

In May Netanyahu formed a unity government with Shaul Mofaz, the newly elected chief of Kadima, the opposition party. The new coalition gave Netanyahu one of the largest majorities in Israel's history. Mofaz became deputy prime minister. Some saw the new coalition as a power grab by Netanyahu, and protesters demonstated in Tel Aviv. Among the demonstrators was former Kadima chief, Tzipi Livni. A week earlier, after losing her position as both leader of the opposition and chief of the Kadima Party, Livni resigned from Parliament. Of her resignation, Livni said she was not "willing to sell the country to the ultra-Orthodox in order to form a government." She also said that she didn't regret focusing on the Israeli-Palestinian conflict during her tenure as leader of the opposition even though it wasn't "in vogue right now."

The new unity coalition turned out to be short-lived. In July 2012, Kadima left the coalition over differences concerning a universal draft law. In October Netanyahu again called for early elections, saying the lack of cooperation among his coalition made it impossible to pass a budget with severe cuts. He said the nationalist Yisrael Beiteinu Party would run with his conservative Likud Party on a joint ticket. Meanwhile, Netanyahu's political rivals warned that the alliance of Likud and Yisrael Beiteinu was exactly the kind of extremism that Israel didn't need.

In another political shake-up, Defense Minister Ehud Barak, who had served as prime minister, announced shortly after the conflict with Hamas in the Gaza Strip in November that he planned to leave politics and would not participate in Jan. 2013's elections. The announcement dimmed hopes that the center-left would pose a credible threat to Netanyahu's bloc. Following Barak's pronouncement, Tzipi Livni declared her return to politics and the formation of her own centrist party, the Movement. Several MPs from Kadima said they would join her, signalling the likely disintegration of that party.